Ceglia v. Zuckerberg et al

Filing 584

DECISION and ORDER granting in part and denying in part 511 Motion to Compel; granting 521 Motion to Compel. Signed by Hon. Leslie G. Foschio on 11/7/2012. (SDW)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

PAUL D. CEGLIA,
DECISION
and
ORDER

Plaintiff,
v.
MARK ELLIOT ZUCKERBERG, and
FACEBOOK, INC.,

10-CV-00569A(F)

Defendants.

APPEARANCES:

PAUL A. ARGENTIERI, ESQ.
Attorney for Plaintiff
188 Main Street
Hornell, New York 14843
BOLAND LEGAL LLC
Attorneys for Plaintiff
DEAN M. BOLAND, of Counsel
18123 Sloane Avenue
Lakewood, Ohio 44107
GIBSON, DUNN & CRUTCHER, LLP
Attorneys for Defendants
ALEXANDER H. SOUTHWELL, and
THOMAS H. DUPREE, of Counsel
200 Park Avenue, 47th Floor
New York, New York 10166-0193
HARRIS BEACH LLP
Attorneys for Defendants
TERRANCE P. FLYNN, of Counsel
Larkin at Exchange
726 Exchange Street, Suite 1000
Buffalo, New York 14210

JURISDICTION
This case was referred to the undersigned by Honorable Richard J. Arcara on
May 27, 2011 for pretrial matters. The action is presently before the court on

Defendants’ Eighth and Ninth Motions to Compel (Docs. Nos. 511 and 521),
respectively filed September 5 and 7, 2012.

BACKGROUND and FACTS1
The original complaint in this action was filed on June 30, 2010, in New York
Supreme Court, Allegany County. On July 9, 2010, Defendants removed the action to
this court asserting subject matter jurisdiction based on diversity. The parties to this
action dispute the authenticity of a “Work for Hire” contract (“the purported contract”)2
allegedly executed between Plaintiff Paul D. Ceglia (“Plaintiff”) and Defendant Mark
Elliot Zuckerberg (“Zuckerberg”), on April 28, 2003, pursuant to which Plaintiff and
Zuckerberg, then a student at Harvard University (“Harvard”), established a partnership
for the development and commercialization of two separate internet business ventures,
including “The Face Book,” the social-networking website now known as Defendant
Facebook, Inc. (“Facebook”), and StreetFax (“StreetFax”), an on-line database project
which Plaintiff was developing and hoped to market for profit. The purported contract
provides that Plaintiff would hire Zuckerberg to perform web programming for
StreetFax, and Plaintiff would help fund the development of Facebook in exchange for a
one-half interest in Facebook. In an Amended Complaint filed April 11, 2011 (Doc. No.
39), Plaintiff asserts seven claims for relief alleging breach of fiduciary duty, actual and
constructive fraud, and breach of contract. Defendants contend the purported contract

1

The Facts are taken from the pleadings and m otion papers filed in this action.

2

A copy of the purported contract is attached as Exhibit A to the Am ended Com plaint (Doc. No.

39).
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is a forgery, and that the real contract executed on April 28, 2003, is a two-page
document titled “StreetFax” (“the StreetFax document”), containing the agreement
reached by Plaintiff and Zuckerberg on April 28, 2003, providing that Zuckerberg, in
exchange for monetary payment from Plaintiff, would perform programming work for
Plaintiff’s StreetFax project, but makes no mention of Facebook.
On June 2, 2011, Defendants moved (Doc. No. 44) (“Defendants’ discovery
motion”) to stay general discovery, but to permit Defendants to conduct expedited
discovery limited to that necessary to determine the issue of the purported contract’s
authenticity. On June 17, 2011, Plaintiff filed a cross-motion (Doc. No. 56) (“Plaintiff’s
discovery motion”) for mutual expedited discovery, albeit limited to the purported
contract’s authenticity. By Order filed July 1, 2011 (Doc. No. 83) (“July 1, 2011
Expedited Discovery Order”), Defendants’ discovery motion was granted and Plaintiff’s
discovery motion was granted in part and denied in part. As relevant to the instant
motions, the July 1, 2011 Expedited Discovery Order directed Plaintiff to produce on or
before July 15, 2011, “all copies of the purported contract in hard-copy form, created on
or before June 30, 2010.” July 1, 2011 Expedited Discovery Order at 1. A Hard-Copy
Document Inspection Protocol filed July 1, 2011 (Doc. No. 84) (“Hard-Copy Document
Inspection Protocol”), governs how Plaintiff’s production and Defendants’ examination
of the hard-copy documents will be conducted. According to the Electronic Asset
Inspection Protocol, so-ordered by the undersigned on July 1, 2011 (Doc. No. 85)
(“Electronic Asset Inspection Protocol”), Defendants’ digital forensics and electronic
evidence experts, Stroz Freidberg, LLC (“Stroz Friedberg”), were to be permitted to
search and examine Plaintiff’s electronic assets, and to
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examine the materials located by such searches in order to identify only
documents, data, fragments, and artifacts that reasonably appear to be related
to authenticity of the purported contract attached to the Amended Complaint and
the purported emails described in the Amended Complaint.
Electronic Asset Inspection Protocol ¶ 3.
A Joint Stipulated Protective Order (Doc. No. 86) (“Protective Order”), filed July 13,
2011, provides that a party to this action
may designate documents, materials, or information as “CONFIDENTIAL –
SUBJECT TO PROTECTIVE ORDER” if the party believes in good faith that the
documents, materials, or information contain confidential information that is not
publicly available (such as proprietary or confidential business, technical, sales,
marketing, financial, commercial, private, or sensitive information, or information
that is otherwise reasonably designable as confidential).
Protective Order ¶ 3.
Although a copy of the purported contract is attached as an exhibit to the
Amended Complaint, a copy of a document titled “Street Fax” (“the StreetFax
document”) was located as an attachment to an email within the memory of one of
Plaintiff’s computers during a forensic examination performed by Stroz Friedberg, in
July 2011 during their search of Plaintiff’s electronic assets.
By Order filed August 18, 2011 (Doc. No. 117) (“August 18, 2011 Order”), the
undersigned directed Plaintiff to, inter alia, identify “all electronic versions of any emails
or purported emails by and among Defendant Zuckerberg, Plaintiff and/or other persons
associated with StreetFax (“Emails”). . . .” August 18, 2011 Order ¶ 2(C). If any such
emails were no longer in Plaintiff’s “possession, custody, or control,” Plaintiff was to
“provide a detailed account of the non-existence, loss, or destruction of each such item,
including the approximate date on which each item was lost, destroyed, or otherwise
disposed of.” Id. ¶ 2. Each email file identified by Plaintiff was to “be produced in their
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native format.” Id. ¶ 3. Plaintiff’s experts were to “produce directly to Defendants all
electronic copies of any Contract in their possession, custody, or control,” id. ¶ 3(A) and
Plaintiff, similarly, was to “produce directly to Defendants all electronic copies or images
of any Contract in the possession, custody, or control of Plaintiff’s attorneys or other
agents.” Id. ¶ 3(B).
On March 26, 2012, Defendants filed two dispositive motions, including a motion
to dismiss the action as a fraud perpetrated on the court (Doc. No. 318) (“Motion to
Dismiss”), and for judgment on the pleadings (Doc. No. 320) (“Motion for Judgment”)
(together, “Defendants’ Dispositive Motions”), and also moved to stay general discovery
pending resolution of the Dispositive Motions (Doc. No. 322) (“Motion to Stay”). In a
Minute and Order entered on April 4, 2012 (Doc. No. 348) (“April 4, 2012 Order”), the
undersigned granted the Motion to Stay in part, but granted Plaintiff expert discovery
limited to that necessary to prepare Plaintiff’s responses in opposition to Defendants’
Dispositive Motions.
Statements within the Declaration of Paul Argentieri, Esq. (Doc. No. 484)
(“Argentieri Declaration”), filed August 21, 2012, in opposition to Defendants’ Motion to
Dismiss indicate the creation of at least four hard-copies of the purported contract
which have not been produced for Defendants’ inspection, including (1) a copy Plaintiff
made in June 2010 when Plaintiff “took the original Facebook Contract that was
examined in July 11 by Defendants [sic] experts, and copied it on a grocery store copier
near his home in Wellsville, New York,” Argentieri Declaration ¶ 14 (first copy); (2)
which Plaintiff then scanned to convert into an electronic file to attach to the email sent
to Argentieri who, in preparation of the original complaint for filing, printed the attached
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electronic file and attached the printed copy of the purported contract as an exhibit to
the complaint, id. ¶¶ 3-7 and 15 (second copy); and (3) of which Argentieri, using
Argentieri’s office copier machine, then made “multiple copies” for service on both
Defendants to this action, id. ¶¶ 8-11 (at least third and fourth copies). In a letter to
Plaintiff’s attorney Dean Boland (“Boland”) dated September 4, 2012, Defendants’
attorney Alexander H. Southwell (“Southwell”), requested Plaintiff produce by 5:00 P.M.
on September 5, 2012, the hard-copies of the purported contract as described in the
Argentieri Declaration, or Defendants would file a motion to compel their production.
On September 5, 2012, Defendants filed Defendants’ Eighth Motion to Compel
(Doc. No. 511) (“Eighth Motion to Compel”), supported by Defendants’ Memorandum of
Law in Support of Their Eighth Motion to Compel and for Other Relief (Doc. No. 512)
(“Defendants’ Memorandum- Eighth Motion to Compel”), and the Declaration of
Alexander H. Southwell, Esq. (Doc. No. 513) (“Southwell Declaration - Eighth Motion to
Compel”) with attached exhibits A through C (“Defendants’ Eighth Motion to Compel
Exh(s). __”).
In an email to Southwell dated September 6, 2012, Boland denied that the
Argentieri Declaration established the existence of additional, undisclosed hard-copies
of the purported contract made prior to the commencement of this action. Boland
further advised that Plaintiff was aware of his ongoing duty to supplement discovery,
and that there are no documents within the custody or possession of Plaintiff or his
counsel that have not yet been produced. On September 7, 2012, seeking to compel
production of the additional hard-copies of the purported contract, Defendants filed
Defendants’ Ninth Motion to Compel (Doc. No. 521) (“Ninth Motion to Compel”),
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supported by Defendants’ Memorandum of Law in Support of Their Ninth Motion to
Compel and for Other Relief (Doc. No. 522) (“Defendants’ Memorandum - Ninth Motion
to Compel”), and the Declaration of Alexander H. Southwell (Doc. No. 523) (“Southwell
Declaration - Ninth Motion to Compel”), with exhibits A and B (“Defendants’ Ninth
Motion to Compel Exh(s). __”).
On September 10, 2012, Defendants filed a motion seeking to extend the time in
which to file their reply in further support of their Motion to Dismiss (Doc. No. 525)
(“Defendants’ Motion to Extend Time to Reply”). Included in the papers Plaintiff filed on
September 12, 2012 in opposition to Defendants’ Motion to Extend Time to Reply were
the Declaration of Paul Ceglia (Doc. No. 535) (“Ceglia Declaration Opposing Motion to
Extend Time”), and the Declaration of Paul Argentieri, Esq. (Doc. No. 536) (“Argentieri
Declaration Opposing Motion to Extend Time”).
On September 14, 2012, Plaintiff filed responses to both the Eighth and Ninth
Motions to Compel. Specifically, Plaintiff filed the Memorandum in Opposition to
Defendants’ Eighth Motion to Compel (Doc. No. 540) (“Plaintiff’s Response - Eighth
Motion to Compel”), with an attached exhibit (“Plaintiff’s Eighth Motion to Compel
Exhibit”), and the Declaration of Jason Holmberg (Doc. No. 541) (“Holmberg
Declaration”). Plaintiff also filed his Response in Opposition to Ninth Motion to Compel
(Doc. No. 543) (“Plaintiff’s Response - Ninth Motion to Compel”), with attached exhibits
A and B (“Plaintiff’s Ninth Motion to Compel Exh(s). __”).
On September 20, 2012, Defendants filed their Reply Memorandum in Support
of Their Eighth Motion to Compel (Doc. No. 544) (“Defendants’ Reply - Eighth Motion to
Compel”), and the Supplemental Declaration of Alexander H. Southwell, Esq. (Doc. No.
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545) (“Supplemental Southwell Declaration - Eighth Motion to Compel”), with attached
exhibits A and B (“Defendants’ Eighth Motion to Compel Reply Exh(s). __”). On
September 28, 2012, Defendants filed Defendants’ Reply Memorandum of Law in
Support of Their Ninth Motion to Compel (Doc. No. 562) (“Defendants’ Reply - Ninth
Motion to Compel”).
Oral argument was deemed unnecessary.

DISCUSSION
1.

Eighth Motion to Compel
Defendants’ Eighth Motion to Compel pertains to a document Defendants have

pursued since at least February 2012, and three other documents referenced therein.
Specifically, in a Decision and Order filed April 19, 2012 (Doc. No. 357) (“April 19, 2012
D&O”), addressing Defendants’ Fifth Motion to Compel (Doc. No. 294), filed February
21, 2012, the undersigned ordered Plaintiff to produce several items Plaintiff had
withheld from discovery and listed on a privilege log, including Privilege Log Item 379
(“Item 379"), an email from Plaintiff’s counsel Paul Argentieri, Esq. (“Argentieri”), to
Plaintiff, consisting of a compilation of emails with attachments, one of the attachments
being a letter referred to as the “Kasowitz letter” or the “April 13 Kasowitz Letter,”3 from
the New York law firm of Kasowitz, Benson, Torres & Friedman LLP (“Kasowitz”) to

3

It was not until the April 13 Kasowitz Letter was produced that the existence of an earlier letter
from the Kasowitz law firm , dated April 12, 2011, and which is the subject of Defendants’ Eighth Motion to
Com pel, was m ade known to Defendants and the court. As such, although in its previous orders the court
referred to the second Kasowitz letter sim ply as the “Kasowitz letter,” in the interest of clarity and to avoid
confusion, the court will henceforth refer to the “Kasowitz letter” as the “April 13 Kasowitz Letter,” and the
earlier letter as the “April 12 Kasowitz Letter.”
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DLA Piper LLP (“DLA Piper”) and Lippes Mathias Wexler Friedman LLP (“Lippes
Mathias”), two law firms that formerly represented Plaintiff in this action, in which
Kasowitz advises DLA Piper and Lippes Mathias it is withdrawing from Plaintiff’s case
based on a determination that the purported contract at issue is a fraud. Plaintiff was
required to produce the April 13 Kasowitz Letter because although Stroz Friedberg’s
analysis of Plaintiff’s electronic assets had revealed an electronically stored file
containing information consisting of a compilation of emails to which the April 13
Kasowitz Letter was attached, the letter’s existence was never disclosed in a privilege
log despite its obvious relevance to the issue of whether the contract at the heart of this
litigation is genuine, and based on a finding that any attorney client privilege that could
have shielded its disclosure was waived by Plaintiff’s sharing of the information
contained in the April 13 Kasowitz Letter with one Jason Holmberg (“Holmberg”), who
had no need to be informed of its contents. April 19, 2012 D&O at 8-11.
By motion filed April 23, 2012 (Doc. No. 358), Plaintiff sought clarification of the
April 19, 2012 D&O, specifically, whether Plaintiff was required to produce those emails
included in Item 379 which did not include Holmberg as a recipient. In a Decision and
Order filed April 26, 2012 (Doc. No. 361) (“April 26, 2012 D&O”), Plaintiff’s motion for
clarification of the April 19, 2012 D&O was construed as a motion for reconsideration
and was denied. On April 27, 2012, Plaintiff filed a motion (Doc. No. 362) (“Plaintiff’s
Motion to Stay”), seeking to stay the April 19, 2012 D&O, including, inter alia,
production of the April 13 Kasowitz Letter, pending the District Judge’s decision on
objections to the April 19, 2012 D&O Plaintiff intended to file. On April 30, 2012,
Plaintiff’s Motion to Stay was denied (Doc. No. 365). Plaintiff’s objections to the April
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19, 2012 D&O and the April 26, 2012 D&O were filed April 30, 2012 (Doc. No. 367)
(“Plaintiff’s Objections”).
On May 24, 2012, Defendants filed their Sixth Motion to Compel (Doc. No. 381),
seeking an order compelling Plaintiff to immediately produce the April 13 Kasowitz
Letter and all attachments. By Decision and Order filed June 28, 2012 (Doc. No. 457)
(“June 28, 2012 D&O”), Plaintiff was again directed to produce the April 13 Kasowitz
Letter to Defendants. June 28, 2012 D&O at 8-11. On July 11, 2012, Defendants,
having yet to receive the April 13 Kasowitz Letter from Plaintiff, filed their Seventh
Motion to Compel (Doc. No. 462), requesting yet another court order compelling Plaintiff
to produce the April 13 Kasowitz Letter. By Decision and Order filed August 15, 2012
(Doc. No. 478) (“August 15, 2012 D&O”), the undersigned again ordered Plaintiff to
produce the April 13 Kasowitz Letter, and also imposed a civil contempt sanction on
Plaintiff for failing to comply with this court’s earlier orders directing production of the
April 13 Kasowitz Letter. August 15, 2012 D&O at 4-8.
In a separate Decision and Order filed August 15, 2012 (Doc. No. 480), District
Judge Arcara denied Plaintiff’s Objections to the April 19, 2012 D&O, affirming the April
19, 2012 D&O in its entirety. On August 17, 2012, Plaintiff finally produced the April 13
Kasowitz Letter to Defendants, designating such letter as “Confidential” pursuant to the
July 13, 2011 Protective Order. Upon receiving the April 13 Kasowitz Letter,
Defendants learned of three other documents referred in the April 13 Kasowitz Letter as
the March 30 Capsicum Communication, the April 12 Kasowitz Letter, and the April 12
Vacco Letter (“the three communications”). In the Eighth Motion to Compel,
Defendants seek to compel Plaintiff to produce the three communications which
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Defendants assert are also responsive to the court’s expedited discovery order, and to
compel Plaintiff to remove from the April 13 Kasowitz Letter the assertedly improper
confidential designation pursuant to the Protective Order. By Text Order issued
October 10, 2012 (Doc. No. 568) (“October 10, 2012 Order”), Plaintiff was ordered to
produce the three communications to the undersigned for in camera inspection, and
Plaintiff complied on October 12, 2012.

A.

The Three Communications

In support of the Eighth Motion to Compel, Defendants argue the three
communications are responsive to the expedited discovery orders because they are
electronic versions of emails between the parties, Defendants’ Memorandum - Eighth
Motion to Compel at 7-8, contain copies of the purported contract or the StreetFax
document, id. at 8-9, and are not privileged, id. at 10-11.
In opposition, Plaintiff argues that general discovery in this action remains stayed
and the three communications are not responsive to any court order, Plaintiff’s
Response - Eighth Motion to Compel, at 1-3, the Defendants should have found them
during their forensics computer experts’ search of Plaintiff’s electronic assets, id. at 3;
that Plaintiff has not waived the attorney-client privilege as to the three communications,
id. at 4; and that there has been no general subject matter waiver on the subject of the
Kasowitz law firm’s decision to withdraw from the action. Id. at 4-7. In further support of
their Eighth Motion to Compel, Defendants maintain the three withheld communications
are responsive to this court’s expedited discovery orders, Defendants’ Reply - Eighth
Motion to Compel at 1-3, Plaintiff has waived any privilege with regard to the
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communications by failing to list the documents on a privilege log, id. at 3-5, and by
disclosing the three communications to Holmberg, a third-party, non-lawyer who had no
need to know the information contained within the documents, id. at 5-9, any attorneyclient privilege that may have attached to the three communications was lost.
Fed.R.Civ.P. 26(b)(1) sets forth the scope and limitations of generally
permissible discovery. In particular,
Parties may obtain discovery regarding any nonprivileged matter that is relevant
to any party’s claim or defense . . . . For good cause, the court may order
discovery of any matter relevant to the subject matter involved in the action.
Relevant information need not be admissible at the trial if the discovery appears
reasonably calculated to lead to the discovery of admissible evidence. . . .
Fed.R.Civ.P. 26(b)(1).
In this case, however, the parties have agreed to limit the initial phase of discovery to
that necessary to determine the authenticity of the purported contract. In connection
with such limitation, the parties have executed several agreements which have been
so-ordered by the court, which has also entered several orders restricting the scope of
the initial phase of expedited discovery. A plain review of the three communications,
provided on October 12, 2012, to the undersigned for in camera inspection establishes
the March 30 Capsicum Communication must be produced, but the April 12 Kasowitz
Letter and the April 12 Vacco Letter need not be produced.
Specifically, the March 30 Capsicum Communication is a compilation of emails
and communications between Plaintiff, Zuckerberg, and others associated with
StreetFax and refer almost exclusively to the StreetFax project for which Plaintiff
retained Zuckerberg’s programming services. As such, the March 30 Capsicum
Communication was required to be produced pursuant to the August 18, 2011 Order.
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See August 18, 2011 Order ¶¶ 2(C) (requiring production of “all electronic versions of
any emails or purported emails by and among Defendant Zuckerberg, Plaintiff and/or
other persons associated with StreetFax”); and 3 (requiring Plaintiff to produce, inter
alia, “all files” identified in accordance with Plaintiff’s obligations under ¶ 2(C)). Further,
attached to the March 30 Capsicum Communication is a copy of the StreetFax
document which is a contract between Plaintiff and Zuckerberg for the StreetFax
project, the production of which was required by the August 18, 2011 Order. August 18,
2011 Order ¶ 3 (directing Plaintiff and Plaintiff’s experts to “produce directly to
Defendants all electronic copies or images of any Contract” in the possession of
Plaintiff, his attorneys, experts, or other agents).
There are, nevertheless, certain portions of the March 30 Capsicum
Communication that need be redacted prior to its production. Specifically, an email
message from Zuckerberg to Plaintiff dated “wed aug 13th” contains a street address in
a village located in Westchester County, New York, which may be for the home of
Zuckerberg’s parents, to which Zuckerberg requests Plaintiff to send payment for
Plaintiff’s work on the StreetFax project. This personal information must be redacted.
Also to be redacted is Zuckerberg’s social security number which Zuckerberg, in a
February 16, 2004 email, provided to one Karin Petersen (“Petersen”), in response to
Petersen who requested the number so she could complete Zuckerberg’s 1099 form in
connection with paying Zuckerberg for his work on the StreetFax project. Finally, the
court observes that within the emails contained in the March 30 Capsicum
Communication is technical programming information pertinent to the StreetFax project
that Plaintiff may reasonably consider proprietary. As such, Plaintiff will be permitted to
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redact that information that is proprietary in nature with regard to StreetFax. Plaintiff
thus must produce the March 30 Capsicum Communication, redacted in accordance
with this Decision and Order, within ten (10) days of this Decision and Order.
The April 12 Kasowitz Letter and the April 12 Vacco Letter, however, need not be
produced because they are not within the four corners of the court’s orders establishing
the parameters of the limited discovery. Specifically, although a plain reading of both
the April 12 Kasowitz Letter and the April 12 Vacco Letter establish their contents are
relevant to the purported contract’s authenticity, and are referenced in documents
Plaintiff has already produced or been ordered to produce, nothing in the record
indicates either letter was an attachment to Privilege Log Item 379, the April 13, 2012
Kasowitz Letter, or the March 30 Capsicum Communication. Nor does either letter
qualify as an email communication between Plaintiff, Zuckerberg, or anyone else
associated with the StreetFax project; rather, both documents were circulated solely
among Plaintiff’s various attorneys. Finally, because general discovery has been
stayed, Plaintiff has yet to be required to produce a privilege log listing all documents
and communications Plaintiff believes are protected from disclosure by any privilege.
That Stroz Friedberg did not identify either letter as possibly relevant material to be
produced subject to Plaintiff’s timely assertion of a privilege is consistent with the fact
that the letters are written by attorneys, to other attorneys, with copies to still other
attorneys, but not to any non-attorneys. Finally, as Plaintiff argues, Plaintiff’s Response
- Eighth Motion to Compel at 4-7, this court has never ruled that Plaintiff has waived the
right to assert the attorney-client privilege as to all communications and documents
pertaining to the reason why Plaintiff’s prior counsel withdrew from representing Plaintiff
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in this matter.
As such, the April 12 Kasowitz Letter and the April 12 Vacco Letter need not be
produced.

B.

Confidential Designation

Defendants request the undersigned overrule as improper Plaintiff’s designation
of the April 13 Kasowitz Letter as confidential. Defendants’ Memorandum - Eighth
Motion to Compel at 11-13. In opposition, Plaintiff maintains the continued designation
of the April 13 Kasowitz Letter as “confidential” is proper under the Joint Stipulated
Protective Order based on Plaintiff’s good faith belief that such letter “contains
confidential information that is not publicly available ‘such as proprietary or confidential
business, technical, sales, marketing, financial, commercial, private, or sensitive
information, or information that is otherwise reasonably designable as confidential.’”
Plaintiff’s Response - Eighth Motion to Compel at 7 (quoting Protective Order ¶ 3). In
particular, Plaintiff maintains the April 13 Kasowitz Letter’s designation as confidential is
reasonable because the information contained therein is not publicly available and
contains sensitive information. Id. at 8. Defendants assert in further support of their
Eighth Motion to Compel that Plaintiff has improperly designated the April 13 Kasowitz
Letter as confidential. Defendants’ Reply - Eighth Motion to Compel at 9-10.
Resolution of this issue turns on the court’s construction of the Protective Order,
a plain reading of which establishes that it was intended to protect proprietary
information pertaining to Plaintiff’s StreetFax project, as well as to personal financial
information such as bank account information and social security numbers. No such
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information is contained within the April 13 Kasowitz Letter, and Plaintiff cannot rely on
the Protective Order to preclude the disclosure of information that is highly relevant to
the central issue before the court, i.e., the authenticity of the purported contract. As
such, Plaintiff has improperly designated the April 13 Kasowitz Letter as confidential,
and such designation is a nullity and must be removed.
Defendants’ Eighth Motion to Compel thus is GRANTED in part and DENIED in
part.

2.

Ninth Motion to Compel
Defendants’ Ninth Motion to Compel seeks an order directing Plaintiff to produce

for Defendants’ inspection several hard-copies of the purported contract that were
created on or before June 30, 2010, the date this action was commenced in New York
Supreme Court, Allegany County. Defendants’ Memorandum - Ninth Motion to Compel
at 1. In support of their motion, Defendants reference the July 1, 2011 Expedited
Discovery Order requiring Plaintiff to produce for Defendants’ inspection “‘all copies of
the purported contract in hard-copy form, created on or before June 30, 2010.’” Id.
(quoting July 1, 2011 Expedited Discovery Order at 1). As stated, Background and
Facts, supra, at 5-6, statements within the Argentieri Declaration filed August 21, 2012,
in opposition to Defendants’ Motion to Dismiss indicate the creation of at least four
hard-copies of the purported contract which have not been produced for Defendants’
inspection. Defendants’ Memorandum - Ninth Motion to Compel at 2. According to
Defendants, despite admitting to making all four of these hard-copies of the purported
contract, the disclosure of which is directed by both the July 1, 2012 Expedited
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Discovery Order and the Hard-Copy Document Inspection Protocol, none have been
produced to Defendants for inspection. Id. at 2-3.
In opposition, Plaintiff maintains that Boland had advised Southwell by email on
September 6, 2012, that neither Plaintiff nor his counsel were in possession or custody
of any documents that should have, yet have not been, produced. Plaintiff’s Response
- Ninth Motion to Compel at 1 and Exh. A. In support of his argument, Plaintiff
references the Ceglia and Argentieri Declarations Opposing Motion to Extend Time,
filed September 12, 2012, in which each denies the existence of any additional copies
of the purported contract made prior to June 30, 2010 that have not been produced,
explaining that the additional copies made in connection with the filing of the original
complaint on June 30, 2010 were discarded as “waste paper” or “trash.” Ceglia
Declaration Opposing Motion to Extend Time ¶ 2-5, 7; Argentieri Declaration Opposing
Motion to Extend Time ¶¶ 14-15. Plaintiff maintains he never contemplated the
authenticity of the purported contract would be questioned or that the court would order
every copy of the purported contract to be produced. Ceglia Declaration Opposing
Motion to Extend Time ¶ 6. In an email to Southwell dated September 13, 2012,
Boland inquired whether the explanations that the additional copies of the purported
contract to which Argentieri referred in responding in opposition to Defendants’ Motion
to Dismiss were discarded as waste paper or trash soon after their creation, as stated
by Ceglia and Argentieri in their respective Declarations Opposing Motion to Extend
Time were sufficient to satisfy Defendants’ Ninth Motion to Compel or, if not, requested
Defendants to indicate how such explanations were deficient. Plaintiff’s Response Ninth Motion to Compel, Exh. B. According to Plaintiff, Defendants never responded to
17

Boland’s September 13, 2012 email. Plaintiff’s Response - Ninth Motion to Compel at
2. Plaintiff further maintains that because it is not possible for Defendants to demand
the production of documents that do not exist, and given that Defendants were advised
of the destruction of the additional copies before Plaintiff’s response in opposition to
Defendants’ Ninth Motion to Compel was filed, Defendants’ continued litigation of such
motion is “wholly unnecessary” and constitutes an abusive litigation practice entitling
Plaintiff to an award of costs and attorneys’ fees incurred in opposing the motion. Id.
In further support of the motion, Defendants characterize the explanations given
by Ceglia and Argentieri regarding the destruction of the additional hard-copies of the
purported contract as “cryptic” and “evasive” for lack of detail as to the identity of the
person responsible for destroying which specific documents and on what date the
destruction occurred. Defendants’ Reply - Ninth Motion to Compel at 1-2. According to
Defendants, Plaintiff’s assertions of full compliance with the July 1, 2011 Expedited
Discovery Order and Hard-Copy Document Inspection Protocol must be considered in
light of the fact that Plaintiff has withheld other documents and electronic assets that
were only produced pursuant to court orders granting Defendants’ earlier motions to
compel. Id. at 1-2 and n. 1. As such, Defendants request an order directing Plaintiff to
confirm, in writing and under oath, that all hard-copies of the purported contract created
by Plaintiff or his agent prior to June 30, 2010 either have been produced to Defendants
or have been destroyed. Id. at 2.
A plain reading of the emails and declarations submitted by the parties with
regard to Defendants’ Ninth Motion to Compel establishes that, as Defendants’ assert,
at least four additional copies of the purported contract were created by Ceglia and
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Argentieri while preparing the original contract that was filed on June 30, 2010 in New
York Supreme Court, Allegany County. See Background and Facts, supra, at 5-6.
Plaintiff does not dispute the creation of such copies but, rather, maintains the copies
were destroyed shortly after their creation by discarding the copies as waste paper or
trash. It is, however, Plaintiff’s assertion that such copies were discarded because
Plaintiff never contemplated the authenticity of the purported contract, ostensibly
granting Plaintiff 50% ownership in a multi-billion dollar company, would be challenged
that blinks credulity. Significantly, spoliation of evidence is an accepted ground for
sanctioning the party responsible for the destruction. See, e.g., Byrnie v. Town of
Cromwell, Board of Education, 243 F.3d 93, 107 (2d Cir. 2001) (the spoliation or failure
to preserve property for another’s use as evidence in pending or reasonably
foreseeable litigation can support imposition of sanctions). Nevertheless, dismissal of
an action is a harsh sanction to be employed only under the most egregious of
circumstances where less drastic alternatives would not suffice. See Bobal v.
Rensselaer Polytechnic Institute, 916 F.2d 759, 764 (2d Cir. 1990) (although outright
dismissal of an action for noncompliance with discovery is within a district court’s
discretion, dismissal “is a harsh remedy to be used only in extreme situations”). Indeed,
Defendants do not request such sanction, and the destruction of the copies has not
deprived Defendants of their ability to assert any plausible defense to the Amended
Complaint, as is evident from the filing of Defendants’ Dispositive Motions which remain
pending before the court.4

4

The court expresses no opinion as to whether Defendants contem plate that forensic
exam ination of such copies would establish the copies and the original purported contract were printed on
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Accordingly, Defendants’ Ninth Motion to Compel is GRANTED. Plaintiff is
ORDERED to file within ten (10) days an affidavit confirming, in writing and under
oath, that all hard-copies of the purported contract created by Plaintiff or his agent prior
to June 30, 2010 either have been produced to Defendants or have been destroyed.

3.

Attorney’s Fees
Defendants request an award of costs, including attorney’s fees, incurred in

bringing both their Eighth and Ninth Motions to Compel. Defendants’ Memorandum Eighth Motion to Compel at 14; Defendants’ Memorandum - Ninth Motion to Compel at
3. As relevant, Fed.R.Civ.P. 37 (“Rule 37"), provides that if a motion to compel
compliance with a discovery order is granted, “the court must, after giving an
opportunity to be heard, require the party . . . whose conduct necessitated the motion,
the party or attorney advising that conduct, or both to pay the movant’s reasonable
expenses incurred in making the motion, including attorney’s fees.” Fed.R.Civ.P.
37(a)(5)(A). Payment of costs and attorney’s fees, however, must not be ordered if one
of three exceptions applies, including (1) the motion to compel was filed before the
movant attempted in good faith to obtain the discovery without court action, (2) the
nondisclosure was “substantially justified,” or (3) “other circumstances make an award
of expenses unjust.” Fed.R.Civ.P. 37(a)(5)(A)(i), (ii), and (iii). In the instant case, only a
partial award of attorney’s fees is justified.
In particular, with regard to Defendants’ Eighth Motion to Compel, Defendants

the sam e paper with the sam e toner ink, which would indicate the copies were created
contem poraneously with the original purported contract.
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sought disclosure of the three communications, of which the court has, for reasons
discussed above, Discussion, supra, at 11-15, determined only one must be produced,
Plaintiff being justified in withholding the April 12 Kasowitz Letter and the April 12 Vacco
Letter. Accordingly, Defendants may recover only those attorney’s fees incurred in
connection with that portion of Defendants’ Eighth Motion to Compel requesting
production of the March 30 Capsicum Communication. As to Defendants’ Ninth Motion
to Compel, Plaintiff has steadfastly asserted the four additional copies of the purported
contract created prior to the filing of the original complaint on June 30, 2010 were
destroyed. Should Plaintiff comply with the court’s direction that he file an affidavit
confirming, in writing and under oath, that the additional copies Defendants seek were
destroyed, the circumstances would make an order requiring Plaintiff to pay
Defendants’ attorney’s fees incurred in connection with the Ninth Motion to Compel
unjust.

CONCLUSION
Based on the foregoing, Defendants’ Eighth Motion to Compel (Doc. No. 511) is
GRANTED in part and DENIED in part; Defendants’ Ninth Motion to Compel (Doc. No.
521), is GRANTED. The April 13 Kasowitz Letter shall not be designated as
“Confidential” and Plaintiff shall provide Defendants with the March 30 Capsicum
Communication, redacted in accordance with this court’s discussion, within ten 10
days of this Decision and Order, but Plaintiff need not produce the April 12 Kasowitz
Letter or the April 12 Vacco Letter. Plaintiff is further ORDERED to file within ten (10)
days of this Decision and Order an affidavit confirming, in writing and under oath, that
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all hard-copies of the purported contract created by Plaintiff or his agent prior to June
30, 2010 either have been produced to Defendants or have been destroyed.
Defendants are directed to file affidavits of costs and attorneys’ fees incurred,
consistent with this Decision and Order, within ten (10) days of this Decision and
Order; Plaintiffs’ opposition, if any, shall be filed within ten (10) days thereafter. Any
showing that the award of costs should be allocated, pursuant to Fed.R.Civ.P.
37(b)(2)(C), between Plaintiff and his attorneys shall be included in the required
affidavits to be filed by the Plaintiff. Oral argument shall be at the discretion of the
court.
SO ORDERED.
/s/ Leslie G. Foschio
________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
Dated: November 7, 2012
Buffalo, New York

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